Liberty Posted July 24, 2015 Share Posted July 24, 2015 It maybe tough to do 37% or even 25% as they get bigger. AAPL and BRK have the same problems now, so it is good idea to adjust for that instead of assuming they would double the earnings power every 3 years into perpetuity. I would assume 4-6 years based on 3-10 year horizon. But even if they have that problem, it would be a good problem to have. There is still some runway given the industry size before they run into the "opportunity set" problem. I don't think that they'll do what they've done so far in perpetuity, that's just asking too much. But I also don't think that they have to keep doing exactly what they've been doing so far to create value for shareholders. That's asking too little of this management. As Pearson said, everything in the company is always for sale at the right price. I wouldn't be surprised if as they get bigger, they start selling some assets that they've much optimized since they acquired them, or if they did spin-offs, or went into major buybacks or special dividends, etc. Whatever the set of opportunities is at the time. Right now they're doing something because that's what works best, but if, for example, pharma assets of the type that VRX wants become super expensive and M&A doesn't make sense, maybe divestiture of some of those overpriced assets might become the thing to do. Link to comment Share on other sites More sharing options...
original mungerville Posted July 24, 2015 Share Posted July 24, 2015 Unless the global economy craters abruptly (which it could) I am pretty confident they can grow by 25%. At this point, I would be surprised if earnings power per share in 2016 was less than $17 per share. So even at this price, Valeant is priced at 15x forward earning power. 15x for something growing 25% in a reasonably stable industry is a great deal. Even if growth was below my 25% estimate, like 20% for 3-5 years, it would still be a good deal. Hell, at 15% growth for 5 years and then 5% thereafter, you wouldn't lose money. So I don't need or expect anywhere near 37% growth and forget in perpetuity (I think you can take it as given that very few people on this board would make that kind of ludicrous assumption) to get me comfortable with even the current price (let alone a $200 per share price which is where it was at a few months ago) Link to comment Share on other sites More sharing options...
bargainman Posted July 24, 2015 Share Posted July 24, 2015 Did Uben sell out? http://finance.yahoo.com/q/mh?s=VRX+Major+Holders he's listed as 0.. But maybe he holds under a different name? Link to comment Share on other sites More sharing options...
Liberty Posted July 24, 2015 Share Posted July 24, 2015 Did Uben sell out? http://finance.yahoo.com/q/mh?s=VRX+Major+Holders he's listed as 0.. But maybe he holds under a different name? http://www.dataroma.com/m/holdings.php?m=VA Link to comment Share on other sites More sharing options...
ZenaidaMacroura Posted July 24, 2015 Share Posted July 24, 2015 Did Uben sell out? http://finance.yahoo.com/q/mh?s=VRX+Major+Holders he's listed as 0.. But maybe he holds under a different name? It looks like it only lists direct holding (no ackman/pershing) and Ubben holds thru valueact -he's probably listed there due to board affiliation edit: My question is why pearson only has 2.8million shares listed - doesn't he hold 10million shares? (edit2: Ackman mentioned his holdings off the cuff in an interview but must have been including options and eventually vested shares for performance etc) Link to comment Share on other sites More sharing options...
Liberty Posted July 24, 2015 Share Posted July 24, 2015 So Allergan might split itself. Why not into ACT and AGN, back to square one... http://www.bloomberg.com/news/articles/2015-07-24/allergan-said-to-be-exploring-breaking-up-into-2-businesses Link to comment Share on other sites More sharing options...
Guest glavacem Posted July 25, 2015 Share Posted July 25, 2015 I didn't buy because munger said that.... My loss.....thanks for the reply. What does everyone think about Munger disliking this company? Not much. This was addressed earlier in this thread. If I remember correctly, Ackman actually asked Munger about it, and basically Munger wasn't really that familiar with VRX. Link to comment Share on other sites More sharing options...
loganc Posted July 25, 2015 Share Posted July 25, 2015 http://www.wsj.com/articles/teva-in-advanced-talks-to-buy-allergans-generic-drug-unit-1437861351 Crazy. I can't help but contemplate the potential increase in the chances of VRX ultimately getting the legacy AGN assets. Link to comment Share on other sites More sharing options...
Liberty Posted July 26, 2015 Share Posted July 26, 2015 http://www.wsj.com/articles/teva-in-advanced-talks-to-buy-allergans-generic-drug-unit-1437861351 Crazy. I can't help but contemplate the potential increase in the chances of VRX ultimately getting the legacy AGN assets. As someone else said on Twitter, 'on the day when VRX buys the former AGN assets, I'll call Pyott personally' 8) But I don't think there's that big a chance in the short term, because of price, and because AGN (formerly ACT) now has a decent tax rate. When VRX started being interested in AGN, it was relatively cheap. Not so much anymore, so other targets would probably be higher on the list, but who knows in a couple years... Link to comment Share on other sites More sharing options...
Liberty Posted July 27, 2015 Share Posted July 27, 2015 That didn't take long to... http://bloom.bg/1Jp5GLN Link to comment Share on other sites More sharing options...
indythinker85 Posted July 27, 2015 Share Posted July 27, 2015 Who are they buying next? http://www.valuewalk.com/2015/07/allergan-meeting-takeover/ Link to comment Share on other sites More sharing options...
giofranchi Posted July 28, 2015 Author Share Posted July 28, 2015 Due to the recent increase in price $VRX has become my largest investment. Gio Link to comment Share on other sites More sharing options...
giofranchi Posted July 28, 2015 Author Share Posted July 28, 2015 Full Interview: Allergan's CEO On Selling His Generics Business And What He'll Buy Next http://www.forbes.com/sites/matthewherper/2015/07/27/full-interview-allergans-ceo-on-selling-his-generics-business-and-what-hell-buy-next/ Gio Link to comment Share on other sites More sharing options...
original mungerville Posted July 28, 2015 Share Posted July 28, 2015 Due to the recent increase in price $VRX has become my largest investment. Gio I think its going to keep getting bigger. It just seems quite undervalued when I consider the organic growth layered on top of M&A growth potential, and the high probabilities of that growth including limited downside. I have recently more clearly realized (although I did to a degree earlier) that the odds of a big mistake in M&A are pretty low. Not just because Pearson is a great capital allocator with a great track record, but even an orangutang with the tax difference would arguably have a base IRR on his acquisitions. It seems historically, just the tax difference alone returned an IRR of 10% for Valeant. So that 10% is the base IRR from which Valeant adds value or makes mistakes from. It gets hard to see how an acquisition can go materially wrong for Valeant given this base IRR and Pearson at the helm (unless the target has a single very large product, and that product/aquiree is large compared to Valeant overall). I am not saying Pearson is infallible, rather I am saying 10% base IRR plus Pearson means M&A is not nearly as risky as a situation where we have either 1) 0% base IRR and Pearson, or worse 2) 10% base IRR and no Pearson, or even worse which is what most competitors have: 0% base IRR and no Pearson. (And although I have not mentioned, relative to competitors, Valeant also has a decentralised organisation with a strong M&A absorption and operating culture with a great board and other management trying to be transparent, apolitical and rational) Link to comment Share on other sites More sharing options...
giofranchi Posted July 28, 2015 Author Share Posted July 28, 2015 I think its going to keep getting bigger. It just seems quite undervalued when I consider the organic growth layered on top of M&A growth potential, and the high probabilities of that growth including limited downside. Well, of course I hope it does! :) Cheers, Gio Link to comment Share on other sites More sharing options...
giofranchi Posted August 3, 2015 Author Share Posted August 3, 2015 Valeant Pharma Exciting But Fairly Valued http://seekingalpha.com/article/3389595-valeant-pharma-exciting-but-fairly-valued?app=1&auth_param=7i5hb:1aruon4:99f8e6b7f7fffec7b56d3c3126a678f1&uprof=25 Of course an 11% discount rate for VRX is too high imo. Second, even if revenues growth stops 5 years from now, FCF per share might still grow significantly through a deleveraging process and buying back shares: a growth rate of 4.8% for years 6 to 20 and then 3% in perpetuity cannot imo describe what will probably happen with VRX. Gio Link to comment Share on other sites More sharing options...
original mungerville Posted August 3, 2015 Share Posted August 3, 2015 Also, the analyst is assuming an average cash tax rate of 16.5% over the next 5 years versus a current tax rate of 5% - without giving any reason. Link to comment Share on other sites More sharing options...
Liberty Posted August 3, 2015 Share Posted August 3, 2015 Also, the analyst is assuming an average cash tax rate of 16.5% over the next 5 years versus a current tax rate of 5% - without giving any reason. This looks like a cookie-cutter piece. That account has 2,277 published articles, and if you open a few at random, they all look very similar. They probably just plug a bunch of numbers in without any real understanding of the underlying business.. Trying to analyze VRX with GAAP numbers hides more than it reveals. Not worth the time, IMO. Link to comment Share on other sites More sharing options...
giofranchi Posted August 3, 2015 Author Share Posted August 3, 2015 Also, to compare companies like TEVA and GILD with VRX makes very little sense to me… Gio Link to comment Share on other sites More sharing options...
original mungerville Posted August 3, 2015 Share Posted August 3, 2015 Also, the analyst is assuming an average cash tax rate of 16.5% over the next 5 years versus a current tax rate of 5% - without giving any reason. This looks like a cookie-cutter piece. That account has 2,277 published articles, and if you open a few at random, they all look very similar. They probably just plug a bunch of numbers in without any real understanding of the underlying business.. Trying to analyze VRX with GAAP numbers hides more than it reveals. Not worth the time, IMO. Agree: cookier-cutter. Its so bad it makes sell-side research look intelligent. Link to comment Share on other sites More sharing options...
giofranchi Posted August 3, 2015 Author Share Posted August 3, 2015 Agree: cookier-cutter. Its so bad it makes sell-side research look intelligent. I agree. Though I try to uncover and read every single short thesis of any investment of mine. I think it is never really a waste of time… If they are bad and loosely put together, well then nothing to worry about! ;) Cheers, Gio Link to comment Share on other sites More sharing options...
EliG Posted August 4, 2015 Share Posted August 4, 2015 Looks like the new VRX CFO bought 12,900 shares in the open market for $232.51 USD. He bought another 7,875 shares in the public market on July 30-31. $254 - $257 USD https://www.canadianinsider.com/company?ticker=VRX Link to comment Share on other sites More sharing options...
giofranchi Posted August 5, 2015 Author Share Posted August 5, 2015 Looks like the new VRX CFO bought 12,900 shares in the open market for $232.51 USD. He bought another 7,875 shares in the public market on July 30-31. $254 - $257 USD https://www.canadianinsider.com/company?ticker=VRX Good to know: I also bought more yesterday! ;) Cheers, Gio Link to comment Share on other sites More sharing options...
Liberty Posted August 10, 2015 Share Posted August 10, 2015 Something I saw this weekend... ;) Link to comment Share on other sites More sharing options...
AZ_Value Posted August 15, 2015 Share Posted August 15, 2015 Oh my sweet sweet Lord... I turned away for a minute and yall went and made Valeant the most expensive stock on the TSX. Good Lord. Alright. First, hi everybody. I hope everybody is doing fine. Been away for a few months because life gets crazy sometimes, and for some it gets crazier than for others. So here's the deal. I will begin publishing my work on Valeant today. I'm gonna post the link for the first episode right away just to get you started (warning - it's fairly long), and then I'll come back and add a bit of commentary to explain a few things and how I will go about publishing the rest throughout the weekend and how I'll discuss Valeant. Alright here's the link. Enjoy, I'll keep talking below for a bit and then get back to getting the rest of the work ready for publication. $VRX: A Detailed look inside a dangerous story well told http://bit.ly/1IToUFt . Cheers Glad to be back. AZ Link to comment Share on other sites More sharing options...
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